Elliott's Paul Singer On How Money Is Created... And How It Dies

Tyler Durden's picture

When we launched our series into the US Shadow Banking system in the summer of 2010 we had one simple objective: to demonstrate just how little the process of modern (and by modern we mean circa 2004 not 1981) money creation was understood. Here was just one example where some $17 trillion (back then, now less) in credit money was rapidly liquidating, an amount greater than the entire M2 and even M3 (had that series still be in circulation) and yet not one academic, pundit or self-professed money expert had or has still accounted for the massive impact of this monetary abstraction on the markets and the economy, which as most know "grows" (to use one of the most misunderstood words in all of economics) primarily by expansion (or contraction as the case may be) of credit, both traditional, which is Bernanke's domain, and "shadow", courtesy of America's #1 export: "financial innovation."

It is now three years later and we are happy to report that almost not one person, not those that hide their complete lack of understanding of the money creation process behind big words, circular arguments, and three letter "monetary theory" acronyms, and certainly not those who set monetary policy, have understood a single thing of what we have been trying to explain all this time, which is merely the modern monetary reality but not from some textbook theoretical perspective, but from a purely practical, where money is nothing more than 1s and 0s in some server, standpoint.

However, one person has. That one person is Paul Singer. Paul is not some fringe blogger, some academic with a chip on his shoulder and an inferiority complex, nor some lunatic gold bug. Paul runs Elliott Management, one of the five biggest hedge funds in the US, which at last check had some $21.1 billion under management. And having managed money successfully since 1977, and witnessed numerous cycles of growth and contraction, not to mention money creation and liquidation, we would argue that his opinion on virtually all matters finance and money-related is second to none. It is certainly orders of magnitude more relevant and correct than that of the shamanistic central planning hacks who sit down every month in Marriner Eccler building to form a circle of depraved (and arguably deferred genocidal) cluelessness, and after a theatrical vote a la Stalingrad circa 1954, determine the cost of money (at least they did in the Old Normal) without even understanding what money actually is.

So for anyone who wishes to know what really happens in the modern world when money is created - and that would be most people who pretend to be informed on this, and other modern financial topics as nowadays it is all about money creation (and soon, destruction) here is, from Paul Singer's latest monthly letter, an extended discussion on the nature of money, how it is created, and most importantly, how it dies.

Money Tsunami

The concept of “money” used to be simple: items of recognized value, initially in the form of shells, livestock, and then precious metals. At some point, someone decided to print currency on paper, but it was widely understood that it had to be backed by something real, like gold or silver. That history is oversimplified, but it illustrates this central truth: Money that is created at will, rather than grown in the field, mined from the earth, or otherwise subject to supply limitations, can be easily degraded. Nobody would want to own something that may or may not have value and purchasing power in the future. What, then, determines the value of money? The worldview and ethics of those in charge of the printing presses are obvious answers that are often overlooked. Another is the confidence (or inertia!) of the people who hold and trade the money, or claims denominated in money.

Fast forward to the modern era, which features central banks, so-called “fractional reserve banking,” leverage, and derivatives. Central banks allowed commercial banks to create money by making loans while keeping small amounts of reserves on hand or at the central banks. As money market funds, bank CDs, and other like instruments were created and then became a sizeable portion of the global financial system, things got even more complicated. An obvious clue that the very definition of money, to say nothing of the appropriate ways to analyze and adjust monetary policy, have departed from the understanding and control of monetary authorities can be found in the proliferation over time of acronyms to describe what used to be called simply “the money supply”: M1, M2, M2A, M3, MZM, and several others.

Add modern derivatives, which entered the scene in a significant way only some 30 years ago, and the picture becomes even murkier. To demonstrate this, in slow motion, consider the creation of a credit default swap (CDS), and then a mortgage collateralized debt obligation (CDO). Assume an investor wants to be long the credit of IBM. The investor offers to sell to a dealer a CDS on IBM. The dealer purchases the CDS and either keeps it or lays off the risk by booking an offsetting transaction with someone else. Actual securities issued by IBM are not part of these transactions – the CDS is just a contract between the investor and the dealer. As IBM’s credit quality is perceived to change, the price of the CDS will fluctuate and money will change hands between the investor and the dealer (based on the “mark to market”). This position is basically a borrowing by the investor who now “owns” a security referencing the credit of IBM, and who has put up only a small deposit – a tiny fraction of the notional credit exposure that the investor is long. It also represents a highly-leveraged loan by the dealer. Although the investor/borrower does not receive the full proceeds of this “loan,” he or she bears the full risk of loss on the underlying asset. It is as if the investor borrowed money from the dealer, added a small amount of his or her own money, and purchased an IBM security with the total amount of money. Interestingly, such borrowings also have the effect of impacting the price of the actual underlying assets (in this case, IBM credit) due to arbitrage pressures. In effect, these transactions by investors and non-bank dealers represent many of the characteristics of the creation and dissipation of money, but they are outside the traditional and commonly-understood mechanics of fractional reserve banking. Most economists would not consider these transactions in the context of money supply, but we think that they are being mechanistic and not seeing the actual effects of the basically unlimited ability of private derivatives transactions to have many of the same effects as are caused by the creation and destruction of “money.”

The ecosystem of mortgage securitizations has similar characteristics. It starts with the tranching of pools of mortgages into mortgage-backed securities (MBS) and then the referencing (via derivatives) of low-rated tranches to form new securities called synthetic CDOs. Based upon fanciful assumptions about diversity that prevailed pre-2008, the bulk of synthetic CDOs that referenced low-rated mortgage-pool tranches magically turned into AAA-rated securities. These instruments, even in subprime mortgage securitizations, were consequently treated by regulators as zero-risk-rated. Until the music stopped, these high-rated securities had many of the powerful multiplier effects of money. Furthermore, the institutions that packaged and sold the MBS, and those that put together the synthetic CDOs, performed many of the functions of banks (conjuring credit out of small reserves) even if they weren’t banks. Finally, the entire process caused demand for houses to increase and prices to rise.

The purpose of this part of the discussion about money is to show that things have gotten really complex and subtle in the modern banking and derivatives era, and that the old model of money as being solely or mainly the product of bank reserves and bank loans is woefully inadequate.

Now one more element should be added to this mix: quantitative easing, or QE. The government spends money on roads, bureaucrats’ salaries, entitlements, etc. To pay for such spending, Treasury sells a security to the public, and it has an obligation to repay the purchaser when the security matures. The security might be a Treasury Bill, a 30-year bond, or anything in between. The Federal Reserve (or the Fed, as it is commonly known) has the ability to set short-term interest rates, which has incentive/disincentive effects on bank lending and consumer spending. In a nutshell, that model has prevailed as the status quo since the Fed was created in 1913, up until 2008.

Since the crash of 2008, there has been an additional dynamic at work. Namely, the Fed is purchasing massive amounts of Treasury securities, either directly or on the open market. To be clear, the cash outlays by Treasury for government spending are the same as in the preceding paragraph. The difference is that post-crash, there are far fewer securities outstanding that the Treasury must pay off at maturity, because trillions of dollars of such securities are owned by another department of the federal government. We think this process is the effective equivalent of money-printing.

For those who think otherwise, we pose the following question: If QE did not have the effect of printing money, why would the Fed do it? We do not think that QE is merely a duration swap. If the government simply wanted shorter duration and cheaper borrowing costs, the easy course would be for the Fed to set interest rates at zero and for the Treasury to issue only 30-day Treasury Bills to pay for government spending. One possible outcome of such an approach would be that the price of long-term bonds would be uncontrolled, and could possibly fall precipitously, thereby driving up long-term interest rates. Instead, the government adopted a zero interest rate policy, or ZIRP, and Treasury’s borrowing rates dropped as the Fed purchased its bonds, elevating the prices of virtually all other securities. All of this contrivance is intended to be an indirect way of supporting economic activity, and perhaps it has done that to some degree. But it is causing massive distortions of risk-reward in stocks and bonds, as well as significant expansion of future risks of both inflation and severe losses in asset prices. These losses would be experienced by both the Fed and by investors.

The Fed’s explanations of these policies are delivered with equanimity and aplomb. However, in our view, the inventions of modern finance have “gotten away from them” and are not adequately understood by the money-printing overseers. A “smoking gun” is the complete failure of policymakers (and financial-institution executives) to predict or understand the circumstances surrounding the 2008 financial crisis – neither the inner workings/interconnectedness of the institutions involved nor the risks inherent in the system. Recently released minutes of Fed meetings in 2007 make it clear that they did not understand the modern financial system: its structure, the instruments that comprised it, the implications of the leverage and risk-taking afforded by untested derivative products, and the vulnerability and opacity of the major financial institutions. It does not mean that the Fed has no credibility when it acts or makes pronouncements today. But it certainly means that they should not have a great deal of presumptive credibility, especially about elements that are experimental and untested or that they got so wrong recently (like QE, and the risks of a system comprised of modern highly-leveraged financial institutions laden with derivatives positions, respectively).

It is critically important for investors to try to understand what global QE is actually doing, where it may lead, and what will happen when it slows, stops or shifts into reverse. What we urge most strongly is that the current atmosphere of calm and stability, and the lack of virulent inflation, must not be relied upon to continue forever. There are certain words and phrases in official communications that give some hint of the uncertainty that exists about key elements of central-bank policies: confidence, anchored inflationary expectations, and velocity are prime examples. Our takeaway is that when investors lose confidence in ZIRP-soaked, QE-ridden, faith-based paper money, the consequences could be abrupt and catastrophic to societal stability. We do not know exactly what to do about it, except to urge policymakers to STOP substituting QE for sound tax, regulatory, labor, environmental, and fiscal policies.

Due to the combination of the lagged nature of inflation in wages and consumer prices, the vital (if possibly more ephemeral than policymakers think) role of “confidence,” and the fact that each particular brand of paper money is competing with other currencies that are similarly mismanaged, the world is in a position today in which the major central banks see only the beneficial effects of QE and not the risks. Bonds that otherwise might be collapsing and repudiated are at sky-high prices with stingy yields. Reported consumer inflation is near historic lows. Consequently, central bankers think that what they got away with yesterday will also work today and next week. Investors either have not figured out that they are long seriously overpriced promises or think that they will all have the luck and perspicacity to reject such instruments before they plunge in price.

The reason we combined derivatives and QE in this discussion is that both are proud inventions of modern financial science, both have many of the characteristics of money-creation, and both are undertaken without any real understanding by public or private sector leaders of their nature, power, interconnectivity, and ultimate consequences. QE is exceptionally dangerous and way past its tipping point. We do not believe it can be unwound without serious consequences. Central bankers think (hope?) that it can be easily unwound at some future date, but they may not be right.

When the rejection of long-term bonds and paper money starts at some unpredictable future time, it may be fast and difficult to contain or reverse. History is replete with examples of societies whose downfalls were related to or caused by the destruction of money. The end of this phase of global financial history will likely erupt suddenly. It will take almost everyone by surprise, and then it may grind a great deal of capital and societal cohesion into dust and pain. We wish more global leaders understood the value of sound economic policy, the necessity of sound money, and the difference between governmental actions that enable growth and economic stability and those that risk abject ruin. Unfortunately, it appears that few leaders do.

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Muppet Pimp's picture

Paul cannot be correct.  The UN ordered him to return Argentina's tall ship, therefore, Argentina shall be considered the authority on monetary matters from here forward. 

BTW, this conclusion is obviously intutive, regardless of the clever paper above.

Furthermore, these machinations are highly complex, similar to a jet engine, and are simply above common folks pay grade.

If all of the above does not do the trick, then finally "How dare you!" (I am offended and you should stop that line of questioning immediately)

nope-1004's picture

Problem is that today's central banks think that lowering rates and providing credit is stimulative.  Money cannot create wealth or jobs or growth.  Money itself is not an economic instrument, it is a byproduct of economic activity used only for convenience to exchange productivity.

The notion that money can create jobs and stimulate economic activity shows banksters' clear ignorance on this matter.  The cart is leading horse in Bernocchio's world, with the asset bubbles created by the Fed as clear proof that they have no clue what "money" really is.

 

bania's picture

Dude, where's my boat?

economics9698's picture

"Paul is not some fringe blogger, some academic with a chip on his shoulder and an inferiority complex, nor some lunatic gold bug."

WTF is this shit?

Nothing new in this blog we do not know.

Nothing Ludwig von Mises or Menger didn't already write about.  Different names, same game, same shit.

"We think this process is the effective equivalent of money-printing."

No shit?  Really?  You a smart man arn't you.

Tyler Durden's picture

Since derivatives and shadow banking did not appear, and certainly did not serve as a source of wholesale credit money creation, until well after the death of both Mises and Menger, it is probably safe to say that they did not write about what this article is about: the vast misunderstanding of money creation in (and by) the modern world.

JPM Hater001's picture

Sorry TD.  I wont do it again.

SafelyGraze's picture

the first sentence in the article has only 43 words.

but the second has 109.

economics9698's picture

Smart bankers always figure out a new scam but it is the same game.  In 1928 it was export/import remittance credit used to expand the money supply.  Will this be a 900 year blow up?  You bet.  Are these methods creative?  Yes they are.  Nothing that is not recognizable to von Mises or Menger in a NY minute.

FreeMktFisherMN's picture

Yep. The pioneering Austrians properly defined inflation as a general increase in the supply of money. All these new usurious schemes are of the same source. The bankers' power does not come from the market; it comes from their government-ordained TBTF status with things like TARP as well as their cartel's monopoly on legal tender and the legal right to counterfeit money.

 

James_Cole's picture

Sure, a lot of what he writes makes sense but Paul Singer is also one of the worst of the worst and lives off graft.He's hated the fed for the past few years but that's likely because they're hammering his portfolio not because of any moral conviction. His latest rant will soothe investors I guess. 

BlackMagician's picture

..."the vast misunderstanding of money creation in the modern world". The understatement of the year...no millinium.

illyia's picture

And, on that note: It is somewhat tiresome to see repeated declarations of how such-and-such an article simply restates a point the commenter already knows all about. Bully for the enlightened one. But the drum-beat of smarmy know-it-all-izm is pointless.

Of course the situation has not changed; that is the point! We want to see the corruption addressed. The latest contributor, restating what might appear obvious to some, might also carry a new POV for someone else. Certainly, the vain iteration of "yadda-yadda-yadda already know that" does nothing but stroke the ego of the commenter (for, I assume, thinking he/she is sooo smart).

Anyone so smart as to be able to say something really new and different should share their wisdom: otherwise... keep a lid on the criticism. ZH is doing a fabulous job, and so are the contributors.

/rant

Cosimo de Medici's picture

Once a man decides he knows everything about something, you cannot get through to him with a hammer and chisel. Of course those are the types who get gob smacked, because they fail to question their own assumptions and beliefs, and the Universe has an unpleasant way of reminding them of their fallibility.

Clint Liquor's picture

William, I love you, man. But, I think you may need professional help. Mona Washington? That's fucked up.

ebworthen's picture

It's Washington from the dollar bill; two cultural icons illustrating that the U.S. and Western civilization have lost their way (but I could be wrong).

ebworthen's picture

There is no such thing as money anymore, only leverage.

eclectic syncretist's picture

And he proposes that the Feds lack of understanding of shadow banking and derivitives will be the catalyst for a sudden and deep economic collapse, but I respectfully disagree.  The Fed is well aware that all it does or is really set up to do is to give funds and support to a select few private banks and the Treasury.  The mantra is that it will all "trickle down" from there and "poof" the economy grows. 

My perspective is that it is the criminal, corrupt, short-sighted looting mentality, unethical, immoral, and unpatriotic culture that has been allowed to infest and control our financial institutions that will cause the downfall.  End of story.

jjsilver's picture

That's not it at all. It's about keeping the scam going as long as possible while they transfer the wealth(your labor) from us to them. The income tax was created just for that purpose. To say the bankers are ignorant is very naive. They are ruthless cunning criminals and know exactly what they are doing.

takeaction's picture

You guys are probably not a big fan of Glen Beck, and neither am I...but this video is a great one to present to any of your "Bonehead" friends who do not understand the Federal Reserve.  In 40 minutes...ANYBODY will be able to understand how fucked we are.

http://www.youtube.com/watch?v=vB5LK-jihgk&feature=player_detailpage&lis...

 

GetZeeGold's picture

 

 

I'll take your word for it.....cause if you were, you would probably know how to spell his name.

 

Definitely watch the video......marxist warning.....your head will probably explode.

 

When you get done with that....I've got some Ann Barnhardt videos for you to see.

 

Silver Bug's picture

The only real money is gold and silver. They will never die.

 

http://jamesturkblog.blogspot.ca/

wintermute's picture

Silver Bug - Sorry to throw a wet blanket on pms, but the collapse of fiat will most likely usher in an era of stable money represented by Bitcoin, or a clone of it based upon the same cryptographic principles

 

https://en.bitcoin.it/wiki/FAQ

illyia's picture

Yeah. I gotta give you props for the bitcoin. But, iffin you think that Corp/Gov won't be monitoring and taking their share - and ultimately control ...

Bitcoin is still bits, and bits can still be hacked - while you are sleeping. Even by those swearing to protect you.

While the electronic money machine will win in the end, there are lots of (r)evolutions to go through regarding corruption, usage and control in the meantime. Only when some Real Faith In Government is restored will bitcoin be entirely free of threat.

Row Well Number 41's picture

If you can't fondle your stash lovingly before bed, so you sleep better, you ain't got shit.  The word "bit" should tell you all you need to know. 

#41

Acet's picture

The vast majority of Bitcoins that could be "mined" have already been mined, so Bitcoin has become a big Ponzi scheme were the early entrants are trying to get more people in so that they can cash their Bitcoins for a higher FRN value.

 

francis_sawyer's picture

There are what?... About $150 million dollars worth of BITCOINS out there?...

~~~

The FED is printing $85 billion A MONTH to keep the fiat ponzi going... That's what? $2.7 billion a day [or a little more than a billion an hour]... So basically, in about much time as it takes for a Bitcoin geek to drive down to 7-11, get a hotpocket, & nuke it in the microwave, the FED will have printed the entire notional value of all the Bitcoins in existence...

But they ARE LEGION!... [they'll tell you so themselves]...

Now take that argument to it's next possible step...

All the holders of 'fiat wealth' in the world... [All the Rothschilds, & dark monied interests ~ forget about Buffett & Gates, they're just piss ants]... ALL of them, COMBINED, are supposed to wake up tomorrow & say "Oh shit ~ we missed out on this BITCOIN thing, we'd better go get us some... So they proceed to exchange some fiats for some... I'll leave aside the fact that if BITCOIN owners were so enamored with their currency, why the hell would they want to sell them for FIATS in the first place?...

But let's say it happened anyway... IOW ~ I guess we're supposed to logically assume that the families who have accumulated their so-called "wealth" [& the entire power matrix that goes along with that], over CENTURIES, which required countless wars, murders, extortions, etc. & have endeavored to KEEP this money & power within tightly knitted family structures], are just going to make a few computer geeks the new POWER BROKERS in the world...

Nice try...

Acet's picture

a) I don't think Bitcoin is going to succeed

b) Before it is blindingly obvious for everybody that it has not succeeed there is plenty of opportunity for insiders to try and fleece ignorant outsiders

c) I'm trying to warn people about the inherent weaknesses of the scheme and Ponzi-like structure. Once people have that information they can make their own minds up on wether to invest in it at this stage or not

d) My moral and ethical duty is fully discharged by giving the information and my advice. What people do with it (or not) is none of my business.

TraderTimm's picture

Between you and francis "luddite" sawyer, I don't know who's competing for the foot-in-the mouth award hardest.

10+ million BTC mined so far, 11 Million to go. The rest haven't been "already mined".

Nice try, I see you're using the common myth of "Deflation is the devil so everyone will never use their bitcoins and instead hoard to infinity". No, there are lots of transactions happening that aren't related to trading activity.

But what else would I expect from some grey-hairs who probably don't understand the internet, much less encryption.

Keep trying guys, I really love to watch you fools dance.

BadKiTTy's picture

"his answers are intuitive"..... what do you base this on? Your intuition?

Jet engines are not complex.... they are complicated. Google each so that you know what the difference is...

K@

espirit's picture

Yep, we're DK'd.  But I think it an error that TPTB are clueless.

 

 

LongSoupLine's picture

Money is created by honest people as a byproduct of honest hard work. Money can be goods traded, exchanged or in some form of commodity.

Currency is created by fucking thieving govts and shit eating fucking bankers to enslave the populus and create false wealth among a few assholes.

Fuck you Bernanke

nope-1004's picture

The sheeple took the bait.  The proliferation of credit caused asset prices to rise on things like cars and homes, therefore, the only avenue that the average person could use to buy a car or house is financing.  So if the average person wasn't so child-like in their wants, the banks wouldn't have enslaved the world by teasing everyone into their "dream home".

 

JuliaS's picture

Original scammers were the blacksmiths that stored metals in their vaults for safekeeping and loaned multiples of physical deposits as paper IOU's. When people discovered such scams, half wanted justice and the other half wanted to get in on the action. Half the blacksmiths were hanged, the other half became bank CEO's working for the benefit of their shareholders.

Whoa Dammit's picture

My money died a few years back. Apparently the same thing happened to many of my neighbors as their cars now sound like they are on their last legs. 

But at least down south , we keep our priorities straight, as demonstrated the photo below showing what we save after a tornado hits (from the front page of today's Atlanta Journal newspaper)

http://media.cmgdigital.com/shared/lt/lt_cache/thumbnail/397/img/photos/...

 

seek's picture

Obliquely related but offtopic... Bitcoin money is created by mining... and the first ASIC miner appeared online today, for those following this.

On topic... Yes, when the QE to inifinity cash comes home, there will be pain. Lots of pain.

 

 

LawsofPhysics's picture

Indeed.  Well at least for those without any physical assets of real value and the means to protect it.

A Nanny Moose's picture

What happens if the power goes out?

Curiously_Crazy's picture

Great. Hopefully the increase in 'money supply' will allow me to buy a decent amount. Won't quite be as cheap as a few cents each when I first got into it several years back.

FWIW I've never held them. They are mearly a transaction mechanism so I never cared what they cost. After seeing the price explode (and then crash) and now reasonably steady (compared to past years) I think I may actually hold some.

For those quick to knock bitcoins I suggest doing a bit - no a lot - of reading on it before passing judgement. It's easy to assume but when you look into the guts of it there is more than meets the eye.

http://blog.bitinstant.com/blog/2013/1/9/all-money-is-not-fiat-money.html

 

Acet's picture

It's all very simple: early adopters of Bitcoin have a massive advantage over later adopters in that back then they could and did create far, far more bitcoins than it's possible now.

In a sense it was the same thing with Gold - it was far easier to find it in the beginning.

 

Early adopters have no advantage over other earlier adopters since everybody has the same mining rate at a given point in time so the market rate of the representation of value (be it gold or bitcoins) is the same for all. However, if they hold on to the tokens mined earlier, earlier adopters have huge advantage over later adopters, since the later ones cannot possibly accumulate anywhere as big as stash of tokens by mining as it was possible in the beginning.

 

With Gold, the early times were tens of millenia ago and "early adopters" died long before they could gain any advantage over latecomers - simply put, over the normal human span of life, mining rates for Gold remained almost constant, so there was nothing to be gained from mining and stashing a lot of Gold on the hope that later mining rates would be lower and hence gold would be worth more due to increase rarity. The only people that ever gained from stashing gold were the many generations removed descendants from a few adopters from a couple of centuries ago (and those were nowhere near the first adopters of gold as a store of value).

With Bitcoins, early times were just some years ago. Early adopters did accumulate stashes of bitcoins on the expectation that they could profit later due to reduced rates of mining. They are very much alive now and  trying hard to monetise their stashes - you'll notice that the biggest pushers for people to jump into the Bitcoin bandwagon are early adopter who have large stashes of Bitcoins (which they want to sell to suckers for tons of FRNs)

 

Thisson's picture

There is nothing to stop anyone from starting a new, competing brand of bitcoins.  If I had a good or service that was in high demand (assume that I am, for example, a drug dealer -- or, alternatively, Walmart), and I was willing to sell my product for "Thisson-coins" (a bitcoin clone), I could do so.  This is the fundamental problem with the currency. 

Acet's picture

So your solution of the inherent Ponzi-schemeness of Bitcoin is saying that I should start a competing Ponzi scheme?

 

Curiously_Crazy's picture

Network hash rate hasn't changed fuck all though :(

 

http://bitcoincharts.com/

fonzannoon's picture

Fantastic read. Thanks Tyler.

Pharming's picture

Sweet picture...

 

Pareto's picture

Decent article.  And for sure makes up for the Cluster Fuck Dynamic Complex Systems of The New Regime For Precious Metals Fucktard Analysis posted 2 doors down.

lunaticfringe's picture

 Paul is not some fringe blogger, some academic with a chip on his shoulder and an inferiority complex, nor some lunatic gold bug.

Well, fuck you. You write that like it is a bad thing.

RebelDevil's picture

We think this process is the effective equivalent of money-printing.

It is money printing! - The "liquidity" pays the workers of the gov. while the Fed buys the bonds.